The truth is that the guts started being ripped out of the financial regulatory system so long ago, (late 1970s) that few people still on Wall Street remember when this system operated. I was at the Federal Reserve Bank of New York when Chicago School of Economics PhDs declared war on any regulation that restricted banks in any way. It didn't matter how carefully the method of enforcement had been proven, or how weak the evidence was it was wrong, they fought the regulation. In one case, we ran over 150 regressions, all but two supported the proposition that smaller banks were more efficient and served their customers better than larger banks. Those two included one that was flat, and one that favored larger banks. Both dealt with very large corporate customers.
The right-wing economists, following what has since become the mantra of the right, 'facts are stupid things' wrote up their paper on those two regressions, throwing out more than 150. They pushed through interstate banking, they pushed through rules which made it almost impossible to block proposed bank mergers, and they did it despite the history and statistic which showed them doing harm to the United States. I'm sure they got great jobs at big banks when they left the Federal Reserve.
Similarly, people who invested with Madoff thought themselves smart and cool and in the know. I was threatened with lawsuits by some of them for not matching his results on some funds.
President Obama has shown absolutely no guts in trying to clean out corruption of any system. The Republicans want to just end the system. The US experienced crash after crash from it's founding until the 1930s, when tight regulations were put in place. With regulations in place, from 1930 until 1986, for 56 years, the market has no serious financially lead crashes. This system was taken apart, and in 1987 we had the first crash in over half a century. Instead of learning our lessons, Washington deregulated Wall Street even more, and we had a more damaging crash in 2008. Until we put regulations back on the banking system, we can expect another, as the fat cats move our jobs overseas and destroy the nation.
It's sad and it's scary.
The right-wing economists, following what has since become the mantra of the right, 'facts are stupid things' wrote up their paper on those two regressions, throwing out more than 150. They pushed through interstate banking, they pushed through rules which made it almost impossible to block proposed bank mergers, and they did it despite the history and statistic which showed them doing harm to the United States. I'm sure they got great jobs at big banks when they left the Federal Reserve.
Similarly, people who invested with Madoff thought themselves smart and cool and in the know. I was threatened with lawsuits by some of them for not matching his results on some funds.
President Obama has shown absolutely no guts in trying to clean out corruption of any system. The Republicans want to just end the system. The US experienced crash after crash from it's founding until the 1930s, when tight regulations were put in place. With regulations in place, from 1930 until 1986, for 56 years, the market has no serious financially lead crashes. This system was taken apart, and in 1987 we had the first crash in over half a century. Instead of learning our lessons, Washington deregulated Wall Street even more, and we had a more damaging crash in 2008. Until we put regulations back on the banking system, we can expect another, as the fat cats move our jobs overseas and destroy the nation.
It's sad and it's scary.
Since Buffett first referred to derivatives as "financial weapons of mass destruction" in reference to derivatives, the potential derivatives bubble has grown from an estimated $100 trillion to $576 trillion dollars in 2009, according to the most recent survey by the Bank of International Settlements.
Financial Trickery Easy To Do
Buffett references the dangers of derivative reporting on and off the balance sheet. Mark-to-market accounting is a legal form of accounting for a venture involved in buying and selling securities in accordance with U.S. Internal Revenue Code Section 475.Under mark-to-market accounting, an asset's entire present and future discounted streams of net cash flows are considered a credit on the balance sheet. This accounting method was one of the many things that contributed to the Enron scandal.
Many people attribute the Enron scandal entirely to cooking the books or accounting fraud. In fact, marking to the market or "marking to the myth", as Buffett so aptly christened it, also plays an important role in the Enron story. Mark-to-market accounting is not illegal, but it can be dangerous. (To gain an understanding of this particular weapon, put aside a few hours to watch "The Smartest Guys In The Room", a movie about the Enron scandal.)
Buffett suggests that many types of derivatives can generate reported earnings that are frequently outrageously overstated. This occurs because their future values are based on estimates; this is problematic because it is human nature to be optimistic about future events. In addition, error may also lie in the fact that someone's compensation might be based on those rosy projections, which brings issues of motives and greed into play.
Financial Trickery Easy To Do
Buffett references the dangers of derivative reporting on and off the balance sheet. Mark-to-market accounting is a legal form of accounting for a venture involved in buying and selling securities in accordance with U.S. Internal Revenue Code Section 475.Under mark-to-market accounting, an asset's entire present and future discounted streams of net cash flows are considered a credit on the balance sheet. This accounting method was one of the many things that contributed to the Enron scandal.
Many people attribute the Enron scandal entirely to cooking the books or accounting fraud. In fact, marking to the market or "marking to the myth", as Buffett so aptly christened it, also plays an important role in the Enron story. Mark-to-market accounting is not illegal, but it can be dangerous. (To gain an understanding of this particular weapon, put aside a few hours to watch "The Smartest Guys In The Room", a movie about the Enron scandal.)
Buffett suggests that many types of derivatives can generate reported earnings that are frequently outrageously overstated. This occurs because their future values are based on estimates; this is problematic because it is human nature to be optimistic about future events. In addition, error may also lie in the fact that someone's compensation might be based on those rosy projections, which brings issues of motives and greed into play.
Bernie Madoff went to jail because he stole from a lot of other rich people who joined what they thought was an exclusive club. Too many important people lost money with Madoff for prosecutors to ignore him. Had he been a big bank, had his victims been struggling homeowners facing balloon payments on fraudulent mortgages, he’d probably still be living it up in Palm Beach.
Meanwhile, there has been no real financial reform because it is not in the best interests of Wall Street to be regulated. The only shining star in the government at the moment, the only official interested in working for people instead of corporations. is Elizabeth Warren. Her new Consumer Financial Protection Bureau just started its own website, where citizens can register complaints and comments.
And what about our president? He just reached out to the U.S. Chamber of Commerce and pretended to wheedle them into developing some patriotism and actually using some of their record profits to hire people. That will not happen, and Obama knows it. This is a man who is still trying to establish some Republican street cred by slashing funding to the home heating assistance program, right smack dab in the middle in one of the worst winters in history. The temperature reached minus-31 in Nowata,Oklahoma Friday night, but I bet the Chamber "folks" are staying plenty warm. Nice timing, Mr. President.
We have long been disabused of the notion that we were getting another FDR. The Roosevelt Justice Department actually prosecuted one former treasury secretary. Bankster and Great Depression architect Andrew W. Mellon was charged with tax fraud, but never went to jail. He settled with the government by relinquishing his massive, priceless, ill-gotten art collection. That collection turned into the National Gallery of Washington, D.C. All we have seen from Obama is a Gallery of Appeasement and Capitulation to the oligarchy which now owns and operates the United States of America in all but name.
FDR told the wealthy corporations he welcomed their hatred, and was elected four times. Obama has told them he craves their approval. Unless he miraculously changes course and starts putting people first, his fate as a one-term wonder is all be sealed. The tragedy is that any Republican alternative will be even worse.
http://kmgarcia2000.blogspot.com/
Meanwhile, there has been no real financial reform because it is not in the best interests of Wall Street to be regulated. The only shining star in the government at the moment, the only official interested in working for people instead of corporations. is Elizabeth Warren. Her new Consumer Financial Protection Bureau just started its own website, where citizens can register complaints and comments.
And what about our president? He just reached out to the U.S. Chamber of Commerce and pretended to wheedle them into developing some patriotism and actually using some of their record profits to hire people. That will not happen, and Obama knows it. This is a man who is still trying to establish some Republican street cred by slashing funding to the home heating assistance program, right smack dab in the middle in one of the worst winters in history. The temperature reached minus-31 in Nowata,Oklahoma Friday night, but I bet the Chamber "folks" are staying plenty warm. Nice timing, Mr. President.
We have long been disabused of the notion that we were getting another FDR. The Roosevelt Justice Department actually prosecuted one former treasury secretary. Bankster and Great Depression architect Andrew W. Mellon was charged with tax fraud, but never went to jail. He settled with the government by relinquishing his massive, priceless, ill-gotten art collection. That collection turned into the National Gallery of Washington, D.C. All we have seen from Obama is a Gallery of Appeasement and Capitulation to the oligarchy which now owns and operates the United States of America in all but name.
FDR told the wealthy corporations he welcomed their hatred, and was elected four times. Obama has told them he craves their approval. Unless he miraculously changes course and starts putting people first, his fate as a one-term wonder is all be sealed. The tragedy is that any Republican alternative will be even worse.
http://kmgarcia2000.blogspot.com/
There's a good reason Bernie Madoff is the only financier doing time. Sen. Dick Durbin explained it back in April 2009 when he tried unsuccessfully, at the height of the financial crisis, to get mild bankruptcy reform through the Senate: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place."
It is hardly surprising that the Congress is underfunding the S.E.C. -- they don't want the S.E.C. catching any big-time crooks. Those crooks are Congress's bread and butter.
But the Congress needn’t have worried. Just as in the days when "No One Would Listen" to Harry Markopolos, the S.E.C. is still pretty much sitting on its hands. Every once in a while, they nab some small-time (by Wall Street standards) crook in a $2,000 suit, but they keep their hands off the big boys. After all, the S.E.C. – in fact, ALL the so-called "regulatory agencies" – are beholden to the crooks, too. Most of the high-ranking regulators come from Wall Street, and after they do their "public service" stint, they'll be right back on the Street, raking in the big bucks. Just yesterday, Eric Dash of the Times reported that "Joseph Jiampietro, one of the government's top deal makers during the financial crisis, has joined Goldman Sachs as a senior investment banker covering the financial services industry...." Dash describes Jiampietro as the FDIC's "main liason to hedge funds and broader Wall Street community," and he adds, "Mr. Jiampietro is the latest in a parade of top federal official to leave Washington for Wall Street." Prior to "his stint in Washington," Jiampietro was an investment banker. Do you really think Mr. Jiampietro's "stint in Washington" had anything to do with public service?
The chair of the S.E.C. – Mary Schapiro – has a long history as a regulator, beginning way back in the days when Ronald Reagan appointed her to sit on the S.E.C. You might think that would make her a tough cookie. Not really. Like the rest of her regulator colleagues, she's in it for the dough. Back in 2008, her last year as head of the Financial Industry Regulatory Authority, Wall Street's (ha ha ha) self-policing arm, Schapiro hauled in compensation of $3.3 million. According to Wikipedia, "on departure from FINRA, she received additional lump sum retirement benefit payments that brought her total package in 2008 to $8,985,334 (about the same as Goldman Sachs CEO Lloyd Blankfein made in that year."
You might suppose that kind of payout would alarm the Senate, which had to “advise & consent” to Schapiro's appointment to head the S.E.C. After all, the Senate regularly puts on hold for months or even years confirmation votes for minor appointments. But, no, in the wake of her big payoff and again during the height of the financial crisis, the Senate cleared Schapiro with a voice vote. The Senate in its wisdom Dr. Schapiro would follow that part of the Hippocratic Oath that reads "first, do not harm." Just think of the great job Schapiro will get with all those marketable "on-the-job" training she's acquired at the S.E.C.
Which, to follow Frank's structure, brings us back to Bernie Madoff. It is hardly surprising that Irving Picard is the prime mover in connecting the dots between Madoff and his enablers at JPMorgan Chase. Despite Mr. Markopolos' many pleas to the S.E.C. and the extensive documentation he sent them, it wasn't the S.E.C. that brought down Madoff. It was Madoff's own sons who told the F.B.I. that their father was running a Ponzi scheme. Where was the S.E.C.? They had previously "investigated" Bernie Madoff. They didn't find a thing. They wouldn’t, would they?
The Constant Weader at www.RealityChex.com
It is hardly surprising that the Congress is underfunding the S.E.C. -- they don't want the S.E.C. catching any big-time crooks. Those crooks are Congress's bread and butter.
But the Congress needn’t have worried. Just as in the days when "No One Would Listen" to Harry Markopolos, the S.E.C. is still pretty much sitting on its hands. Every once in a while, they nab some small-time (by Wall Street standards) crook in a $2,000 suit, but they keep their hands off the big boys. After all, the S.E.C. – in fact, ALL the so-called "regulatory agencies" – are beholden to the crooks, too. Most of the high-ranking regulators come from Wall Street, and after they do their "public service" stint, they'll be right back on the Street, raking in the big bucks. Just yesterday, Eric Dash of the Times reported that "Joseph Jiampietro, one of the government's top deal makers during the financial crisis, has joined Goldman Sachs as a senior investment banker covering the financial services industry...." Dash describes Jiampietro as the FDIC's "main liason to hedge funds and broader Wall Street community," and he adds, "Mr. Jiampietro is the latest in a parade of top federal official to leave Washington for Wall Street." Prior to "his stint in Washington," Jiampietro was an investment banker. Do you really think Mr. Jiampietro's "stint in Washington" had anything to do with public service?
The chair of the S.E.C. – Mary Schapiro – has a long history as a regulator, beginning way back in the days when Ronald Reagan appointed her to sit on the S.E.C. You might think that would make her a tough cookie. Not really. Like the rest of her regulator colleagues, she's in it for the dough. Back in 2008, her last year as head of the Financial Industry Regulatory Authority, Wall Street's (ha ha ha) self-policing arm, Schapiro hauled in compensation of $3.3 million. According to Wikipedia, "on departure from FINRA, she received additional lump sum retirement benefit payments that brought her total package in 2008 to $8,985,334 (about the same as Goldman Sachs CEO Lloyd Blankfein made in that year."
You might suppose that kind of payout would alarm the Senate, which had to “advise & consent” to Schapiro's appointment to head the S.E.C. After all, the Senate regularly puts on hold for months or even years confirmation votes for minor appointments. But, no, in the wake of her big payoff and again during the height of the financial crisis, the Senate cleared Schapiro with a voice vote. The Senate in its wisdom Dr. Schapiro would follow that part of the Hippocratic Oath that reads "first, do not harm." Just think of the great job Schapiro will get with all those marketable "on-the-job" training she's acquired at the S.E.C.
Which, to follow Frank's structure, brings us back to Bernie Madoff. It is hardly surprising that Irving Picard is the prime mover in connecting the dots between Madoff and his enablers at JPMorgan Chase. Despite Mr. Markopolos' many pleas to the S.E.C. and the extensive documentation he sent them, it wasn't the S.E.C. that brought down Madoff. It was Madoff's own sons who told the F.B.I. that their father was running a Ponzi scheme. Where was the S.E.C.? They had previously "investigated" Bernie Madoff. They didn't find a thing. They wouldn’t, would they?
The Constant Weader at www.RealityChex.com
I don’t think any Picard or Pecora or anyone else is going to change the system. The system has been so corrupted and co-opted by people with enormous wealth and power that it is likely beyond changing. Individuals may try to rise up, or blow whistles, or point fingers, but those impotent actions will get them where they got Markopolos, which is nowhere. How is it possible that billions were extracted from the taxpayers’ pockets to cover the sins of the big financial players, and no one can be held accountable? Why are we stumbling around with empty pockets, wondering where to find justice?
When half the Congress of the United States is tied to big money and are little more than shills for the filthy rich, the idea that justice will prevail is quaint. The Supreme Court’s ruling in favor of Citizens United tells you all you need to know about justice.
It’s said that behind every great fortune is a great crime. This time, the crime is that the criminals are influencing how laws are made. Madoff was foolish to run an illegal Ponzi scheme. He should have used his huge financial resources to buy a few congressmen, or run for office himself. Once in power, he could have worked with his like-minded brethren and simply made Ponzi schemes legal. That’s the American way.
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